You may have read the title above and thought, “I have one personal goal when it comes to online trading; to make money!” Without a doubt, growing your wealth is the fundamental reason you’ve decided to begin investing. Yet the potential to get the most out of this new endeavour can be greatly impacted for the better by setting personal goals for your online trading. Here are the steps you can take to make that happen.

Step 1: Establish a timeline

It’s much harder to turn your goals into reality without a specific timeline; after all, that gym membership you bought January 2 technically doesn’t expire for 12 months; but by then, a couple spin classes likely won’t help you reach your previous New Year’s objective. Trading works in a similar fashion; the good news is, everyone’s timeline can be different, and still be the perfect fit for them.

For example, you might be looking to develop one new skill within a calendar year, and you’ve chosen that to be investing. Or you’ve promised yourself you’ll purchase your dream car before your next milestone birthday, and you want to get 25 per cent closer to that target within the next two years. What matters the most is being honest with yourself, and sticking with your plan. Being focused on realistic timelines can help keep things in perspective, and prevent you from getting too high or low when trading.

You may want to try: Listing the top three upcoming events or targets in your life that online trading can play a part in (being careful not to make anything 100 per cent dependent on trading – that is never a recipe for successful investing), and establishing a realistic timeline beside each. From there, narrow it down to one or two items. With the help of a timeline, you’ve just brought your personal goal(s) one step closer to reality.

Step 2: Map out your product comfort zone

You’ve heard that old adage encouraging you to “step outside of your comfort zone.” Well, successful investors tend to operate the opposite way. Warren Buffett calls it his “circle of competence,” and he’s worth many, many billions of dollars. When it comes to online trading, this means investing in products that you feel you know best.

If you’ve done some research on the stock market prior to beginning your online trading, you’ve probably read more about common shares or ETFs than you have on bonds. Or, if you’ve studied options, you may feel quite comfortable dealing with buying puts or calls, but are not quite sure how you feel about selling them. That’s perfectly alright. What’s important is that you’re choosing to invest your money in products and strategies that you understand. It has a better chance of paying off (literally), than guessing while you trade. It will also help you establish realistic personal goals and timelines that you feel comfortable with, rather than setting arbitrary targets.

Comparing the TFSA to the RRSP Ready to start saving, but only have enough to invest in one vehicle? That’s just fine; but which one is best for both your current financial situation and your future goals? 

You may want to try: Assigning a “comfort” number between 1 and 10 to the various products available for you to trade. If you can’t score a product higher than a 7 at the current time, either leave it alone, or promise to learn more about it before re-visiting it as a potential trading option.

Step 3: Decide on the level of risk that works best for you

We each have a different tolerance for risk, depending on our age, responsibilities, and unique personalities. Establishing your level of tolerance is a natural third step in setting your personal goals. For example, an investor with a 10-year timeline may feel more comfortable investing in a volatile stock they believe in long-term than someone who is fearful of having to sell when their shares are down after several months. Similarly, an investor who feels that buying options is well within their comfort zone may be happy to accept the risk of their puts or calls expiring worthless, believing that their knowledge of that particular product will allow them to make the most of these leveraged trades over time.

Establishing your accepted level of risk will help you keep an even-keeled, engaged interest in your online trading, making you less likely to hit the panic button when things aren’t going your way, and ensuring you’re never bored enough to ignore future trading opportunities. You may find that your acceptable level of risk tends to help you better identify realistic personal goals.

You may want to try: Creating a few different scenarios, such as, “The call option I purchased is down 75%,” then ranking them as either “tolerable,” “makes me nervous,” or “intolerable.” When you set your personal goals, ensure making them a reality does not require crossing over into the latter two categories. As you become more comfortable with trading, you can then reassess your “makes me nervous” category, and go from there.

Online trading can be an exciting, rewarding endeavour if you’re honest with yourself about what you want to get out of it, and how. What’s more, achieving the personal goals you established before you began investing can feel even more rewarding when you know they’re the result of creating a plan and sticking to it. Consider meeting these personal goals using a virtual brokerage today.